Steve Murrells aims to double profits and convenience stores in five years.

"It could be one of the biggest and best turnarounds in corporate history," says Steve Murrells as he contemplates the Co-operative Group rising phoenix-like from the ashes of controversy and financial mismanagement.

Murrells, who runs the group's £7bn food retail empire, could be as significant a figure in the recovery of the Manchester institution as Paul Flowers, the disgraced former Co-op Bank chairman, was in its shaming.

His mission to lead a turnaround of the Co-op's ailing supermarket division started in 2012, long before the black hole in the Co-op bank's balance sheet was laid bare. "The brand was a sleeping giant that had lost its way," he says of his decision to join the Co-op, quitting a happy berth at Danish bacon co-operative Tulip. "To be part of a turnaround team that could reconnect with a nation was a challenge I found compelling."

That is lucky – because the Co-op has even more need to reconnect with its members as a result of the financial and management chaos that has shredded its ethical reputation. Despite the near-meltdown, Murrells has been quietly getting results at its food business, which accounts for 80% of group turnover – and is now floating some radical ideas as it looks to get back to practising what the Rochdale pioneers preached.

"Stores don't have to be a profit centre," he suggests as one avenue the grocer could go down. "You could put everything back into a community and create a virtuous cycle."

Murrells is looking at is the extended warranties sold by its electricals business. "We need to find a way of getting ourselves off the drug of warranties," he says. "We should be trying to provide different solutions that are in the interest of customers. You might do warranties at cost." That would be bad news for the likes of newly floated AO.com, which makes considerable profits from the dark art of warranties.

Last year Murrells set out a five-year plan to double the Co-op's convenience chain to 4,000 stores. In that time profits are to double from the £288m Murrells inherited. At the same time it will shed most of the supermarkets acquired as part of the ill-fated £1.6bn acquisition of Somerfield in 2008 as well as its farms and pharmacies businesses.

With the working title "True North", his plan is a straightforward one that involves refurbishing stores, improving product ranges and sharpening prices. "There was too much flip-flopping of initiatives that sat in Manchester," he says of a situation that had paralysed the business. "This is a strategy from the shelf edge."

The new job forced Murrells and his family to move "north" to Prestbury, Cheshire, from the sunnier climes of Stratford-upon-Avon. "It rains a lot," he says of the north-west.

When Murrells, a former Sainsbury's and Tesco executive, joined in the summer of 2012, trading was dire, with like-for-like sales down 5%. The picture is much healthier today with the chain seeing growth of 1% in the year to date and the convenience business at underlying growth of 4%. "That feels like the start of the turnaround," he says.

As price competition heats up between the big supermarket chains, Murrells has pledged to invest £100m in prices this year, "which as a proportion of our business is more than the 'bazooka' others (like Morrisons) have announced", he says.

On a tour of a refurbished branch in the trendy Shoreditch area of London, Murrells points to upmarket new products, ranging from Ventricina salami, buffalo mozzarella and roquito pear-topped pizzas to wild Pacific pink salmon and pollock fish pie. By the end of this year 1,000 stores will have the new look or elements of it.

Kantar Retail analyst Bryan Roberts is "very impressed" by the refurbished stores but says makeovers are in some cases long overdue. "The historical shortcomings of the Co-op were on range and price, and Murrells seems to be making progress in these areas," he says.

Last week Tesco boss Philip Clarke remarked that if the market leader was just an internet and convenience store retailer, "we would be shooting the lights out".

Murrells says while the Co-op's size relative to the big four means it will never be the cheapest, it can be the best when it comes to convenience. "I think we are ahead in our understanding of how convenience works. Our understanding would be equal to Tesco and better than many of the others."

Murrells, who spent 15 years at Tesco including running its One Stop convenience chain, says he is similarly alive to the threat posed by the German discounters Aldi and Lidl – and Sainsbury's recent decision to get into bed with Netto. Aldi and Lidl combined are now bigger than the Co-op, which now has just 6% of the UK grocery market – down from 25% in its heyday.

"You have to be aware of any business that has suddenly connected with the nation," he says. "It's taken many years but the discounters have changed the landscape of shopping in this country and it will never go back."

The Netto-Sainsbury's tie-up is an interesting deal he says, but "time will tell whether it's the right decision".

"Having another player in the market isn't helpful," he says.

Murrells believes the mutual's darkest hours are now behind it, with a calm settling over the organisation since the decisive agm in May. "Our members have voted for change and reform, and we now have a framework for change that will make the business stronger. You look for the good things to come out of these challenging times and during the darkest eight to nine months the food business had actually started to reconnect with customers again."

The mutual's weakened financial state has been bad news for its 8 million members, who missed out on their annual "divvi", and Murrells admits there has been a slowdown in shoppers using their cards while the future shape of the scheme is being debated internally.

"Membership is critical," he says. "But we have to think more smartly about it other than just the payout. We've got to provide a suite of benefits that are relevant to peoples' reasons for becoming a member.

"Those plans are being worked through right now – the alchemy of that will be very exciting."